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STERLING EXTENDS ITS DECLINE AGAINST THE MAJORS

 
20 July 2010

The British Pound extended the decline from the previous day and slipped to a low of 1.5174 during the European trade as the economic docket reinforced a weakened outlook for the U.K., and the exchange rate may continue to trend lower going into the North American session as investors hold a cautious outlook for the region.

Key fundamental releases from the Uk overnight includes the report by the Bank of England which showed mortgage approvals by the major banks in Britain increased 48K in June after expanding 51K in the previous month, which fell short of expectations for a 52K rise, and the ongoing weakness in the private sector may lead the central bank to hold a dovish outlook for future policy as it aims to encourage a sustainable recovery.

What is evident at present is Sterling is still vulnerable to downside risks and further selling pressures as the Pound opens up down against virtually all of its 16 counterparts and may continue to slide going into the north American trade. The Pound has seen heavy losses against the higher yielding currencies such as the AUD which is down well over 1% on the day at 1.7332. Sterling/euro meanwhile, has started the day around Stg0.85p after yesterday’s fall to a seven week low of Stg0.8532. With over a seven point drop in the space of 2 weeks, Euro buyers should look to work “Stop” orders to avoid further downside movement as the Euro continues its corective pullback.

U.S. dollar price action was mixed once again, with the USD/JPY rallying to a high of 87.17, and the greenback is likely to face increased volatility going into the North American trade as the economic docket is expected to reinforce a mixed outlook for future growth. Housing starts in the world’s largest economy is projected to fall 2.7% in June to an annualized pace of 577K from 593K in the previous month, while building permits are forecasted to increase 0.2% to 575K during the same period.

Looking at the key data releases today The Bank of Canada meets this afternoon and it is expected to raise rates by 0.25% to 0.75% so CAD buyers should remain cautious.

Opinion of Tom Trevorrow
Analyst at Tor FX International Currency Brokers
[email protected]
+44 (0) 1736 335266

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